Is the Oregon Cannabis Market too Crowded to Make Money In?

On October 1st, the floodgates opened for recreational marijuana sales in Oregon. So far the marketplace looks great for buyers. Not only has a quirk in the law allowed for three months of untaxed purchases, but hundreds of pot shops and dispensaries have to compete with each other to win over a new customer base.

High Times is currently reporting on dispensaries offering discounted marijuana down as much as 35 to 40 percent below market value while also giving out food and other items as incentives for consumers to bring business their way.

And some cannabis store proprietors are nervous about the future of the market in Oregon. “I don’t expect every store to survive,” dispensary owner Nicholas Saulsberry told Yahoo! Finance. Saulsberry’s business Meg’s Marijuana has barely held on as a medical marijuana dispensary for the past year. And now that recreational has become legal, there’s going to be even more competition.

There is no limit to the number of licenses Oregon will issue to cannabis growers and retailers, and application fees are low. “I do expect competition to be pretty fierce especially with a lot of deep pocketed out of state money,” Saulsberry said.

New Frontier Financial Group, a cannabis data firm out of Washington D.C. feels the same way, predicting that the market will grow to nearly twice its current size by 2020. “It’s going to become very competitive very quickly,” John Kagia, director of industry analytics for the firm, told Yahoo.

The date of January 1, 2016 looms over the heads of all cannabis retailers in Oregon. That is the day that the state will begin to tax all transactions. At that point, the prices customers have gotten used to, already possibly below a tenable profit margin for proprietors, will increase by as much as 20 percent a transaction. How will stores fight to hold on to their clientele then, especially when their are alternatives such as the black market or growing your own.

The state has 72,517 registered MMJ patients and 46,292 registered growers, meaning there are a whole lot of people capable of sustaining their marijuana needs without turning to a store at all.